"We have a consultant working for us that we would like to make an offer to. However, due to internal equity issues, we are not able to offer him the base he is looking for. What are some creative things we could offer him in lieu of a higher base? Other than a sign on bonus, perhaps a retention bonus, higher vacation accrual...is there anything else I""m not thinking of?"

We have a consultant working for us that we would like to make an offer to.
However, due to internal equity issues, we are not able to offer him the
base he is looking for. What are some creative things we could offer him in
lieu of a higher base? Other than a sign on bonus, perhaps a retention
bonus, higher vacation accrual...is there anything else I""m not thinking of?

The first exercise would be to calculate his total reward package,,,,base pay plus benefits both paid time off and health and welfare and compare to what he is asking for. Calculate the gap as a percent of his base pay and design a bonus based on MBO's, financial measures, or a combination of the two. The bonus could be in lieu of any 'merit' increase. Don't know how this would affect others in the same position, but you would have to look at that in order to defend paying him differently than others in the same position. Otherwise, the sign on bonus plus a retention bonus may be the way to resolve if he is that valuable.
Mary Lynch
Compensation Manager CCP
5151 San Felipe, Suite 1600
Houston, Texas 77056
713.985-5373
[cid:image002.jpg@01CA3831.B791A950]
________________________________
From: juliahann via compensation-strategy [mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 2:05 AM
To: Lynch, Mary (PSC)
Subject: [compensation-strategy] What can we offer a candidate in lieu of a higher base salary?
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Posted by juliahann (Sr. Manager, Comp & Ben)
on Sep 18 at 3:06 AM

We have a consultant working for us that we would like to make an offer to. However, due to internal equity issues, we are not able to offer him the base he is looking for. What are some creative things we could offer him in lieu of a higher base? Other than a sign on bonus, perhaps a retention bonus, higher vacation accrual...is there anything else I""m not thinking of?

Answered

Sorry! Something went wrong on our end. Please try again later.

Richard_Tyler

September 18, 2009 08:30 AM

Within our business we use to have a lot of external consultants working for us for sometimes up to 3 years on new networks, technology, implementation etc. It was always know that their base salaries were higher (in some cases 1 and a half times) than our permanent employees performing the same role.
It is a difficult scenario when you are faced with a) reducing the number of external consultants and b) not wanting to loose their experience and trying then to offer them a permanent role.
In most cases you will find it very difficult to came to an agreement on their base salary?s as they are used to this being of a certain level (I have found this to be generally between 20% to 50% higher) so do not try and compete on this. Instead point out the positives about joining the company as a full time employee, paid holiday, Bonus and or Commission structures that could be tweaked to suit the situation, Pension schemes, and all other benefits such as car, private health insurance, flexible working, paid company training and that their work is far more secure etc etc.
What I found very useful is to draw up a Total Reward statement (or Reward & benefits modelling) giving their current ?package? as an external consultant, and then doing a ?mock up? of what this could be if they joined the company on a permanent contact.
Example could be as the external consultant he/she receives a fix rate which may come to ?80K per annum.
However, as a permanent employee they would get a basic of ?50K, plus 25 days paid holidays = ?4800, an annual bonus or commission of e.g. bonus of 10% = ?5K, the company pension scheme which could be as much as ?10K per year and just with these the annual total reward for this person is now not sitting far below the ?80K but its now at only 10K below. If there is a company car benefit then this may bring them very close to their asking price.
Hope this helps you.

And after doing all the calculations, if you are still coming short then you may add performance bonus. Performance based bonus keep people on their toe and does not give them entitlement feeling. Make performance bonus not easy and too difficult. It should be realistic.

There are any number of ways to compensate the consultant like
'quarterly performance bonuses' but do not provide different benefits
for him than you provide for other employees. You would be moving into
the territory of discrimination. I would tie the 'difference' between
current comparable employee's compensation and this consultant's
requirement to performance/completion of projects and pay in some form
of bonus.

If his compensation requirements are current market value for his skills
set perhaps you should review your pay levels. Employees always find out
who is being paid what and if there is a real pay equity problem within
your organization, you might want to address that because it will cause
you more problems down the line.

We have a consultant working for us that we would like to make an offer
to. However, due to internal equity issues, we are not able to offer him
the base he is looking for. What are some creative things we could offer
him in lieu of a higher base? Other than a sign on bonus, perhaps a
retention bonus, higher vacation accrual...is there anything else I""m
not thinking of?

The candidate is in his forties. Finance management.
From: allan_feinberg via compensation-strategy [mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 1:09 AM
To: Julia Hann
Subject: RE: [compensation-strategy] What can we offer a candidate in lieu of a higher base salary?
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Posted by allan_feinberg (Director)
on Sep 18 at 3:58 AM
[http://images.ittoolbox.com/vt/icons/vote.png]Mark as helpful<http://hr.toolbox.com/api/ContentVote/3003461/1/2/>
How old is he/she? And what profession?
From: juliahann via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, 18 September 2009 3:05 PM
To: Allan Feinberg
Subject: [compensation-strategy] What can we offer a candidate in lieu of a
higher base salary?

Posted by juliahann (Sr. Manager,
Comp & Ben)
on Sep 18 at 3:06 AM
We have a consultant working for us that we would like to make an offer to.
However, due to internal equity issues, we are not able to offer him the
base he is looking for. What are some creative things we could offer him in
lieu of a higher base? Other than a sign on bonus, perhaps a retention
bonus, higher vacation accrual...is there anything else I""m not thinking of?

Consultants - you do not pay benefits, 401K, management costs are lower,
payroll taxes, etc. also, it is a need base. You can lay them off without
any compensation or wait periods which are offered to your employees. Also,
consultants, pay their own commuting and residential expenses when they go
to different jobs in different locations. All these aspects, when you add
up, equates to more than 50% of pay. Hence, on-paper it may seem like you
are paying more, in fact you are not. Also, you are contractors for a time
when you need a particular skill for the job, once that is over, you do not
need that.

I have seen a contractor's company offered 75/hour but was hired full time
for 80K.What you offer is to his company and not to individual, then company
takes profit (if he or she is a direct employee, if not then two or three
parties take profit out of it). So, you have to look at this as a total
package. We have offered a candidate a retention bonus, say, 5K at the end
of the first year and 10K at the end of second year, this also spreads out
additional compensations to other budget years.

Thank you,

Rajesh Desai

Vice President
Systemart, LLC
Business Process Solutions for Higher Profitability

271 Route 46 West, Suite A 201, Fairfield, NJ 07004 (USA)
Phone: (973) 227 6582 x108
Cell: (973) 978 8170
Fax: (973) 808 0237
Website: <blocked::http://www.systemart.com> www.systemart.com
PLEASE NOTE: Under Bill s.1618 Title III passed by the 105th U.S. Congress
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Posted by juliahann (Sr. Manager,
Comp & Ben)
on Sep 18 at 11:48 AM
<http://hr.toolbox.com/api/ContentVote/3004729/1/2/> Mark this reply as
helpfulMark as helpful
The candidate is in his forties. Finance management.
From: allan_feinberg via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 1:09 AM
To: Julia Hann
Subject: RE: [compensation-strategy] What can we offer a candidate in lieu
of a higher base salary?
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Posted by allan_feinberg (Director)
on Sep 18 at 3:58 AM
[http://images.ittoolbox.com/vt/icons/vote.png]Mark as
helpful<http://hr.toolbox.com/api/ContentVote/3003461/1/2/>
How old is he/she? And what profession?
From: juliahann via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, 18 September 2009 3:05 PM
To: Allan Feinberg
Subject: [compensation-strategy] What can we offer a candidate in lieu of a
higher base salary?
Posted by juliahann (Sr. Manager,
Comp & Ben)
on Sep 18 at 3:06 AM
We have a consultant working for us that we would like to make an offer to.
However, due to internal equity issues, we are not able to offer him the
base he is looking for. What are some creative things we could offer him in
lieu of a higher base? Other than a sign on bonus, perhaps a retention
bonus, higher vacation accrual...is there anything else I""m not thinking of?

Wasn't this situation where the employer wanted to hire the consultant
to become a regular employee of the company but the consultant's
requested base salary was more than current employees in the same job
category? Otherwise why would she be worried about a pay equity
situation? Perhaps I misunderstood her dilemma.
M

Posted by rren0429 (vp)
on Sep 18 at 12:02 PM
Mark this reply as helpfulMark as helpful
<http://hr.toolbox.com/api/ContentVote/3004768/1/2/>
Generally,
Consultants - you do not pay benefits, 401K, management costs are lower,
payroll taxes, etc. also, it is a need base. You can lay them off
without
any compensation or wait periods which are offered to your employees.
Also,
consultants, pay their own commuting and residential expenses when they
go
to different jobs in different locations. All these aspects, when you
add
up, equates to more than 50% of pay. Hence, on-paper it may seem like
you
are paying more, in fact you are not. Also, you are contractors for a
time
when you need a particular skill for the job, once that is over, you do
not
need that.
I have seen a contractor's company offered 75/hour but was hired full
time
for 80K.What you offer is to his company and not to individual, then
company
takes profit (if he or she is a direct employee, if not then two or
three
parties take profit out of it). So, you have to look at this as a total
package. We have offered a candidate a retention bonus, say, 5K at the
end
of the first year and 10K at the end of second year, this also spreads
out
additional compensations to other budget years.
Thank you,

Rajesh Desai
Vice President
Systemart, LLC
Business Process Solutions for Higher Profitability
271 Route 46 West, Suite A 201, Fairfield, NJ 07004 (USA)
Phone: (973) 227 6582 x108
Cell: (973) 978 8170
Fax: (973) 808 0237
Website: <blocked::http://www.systemart.com> www.systemart.com
PLEASE NOTE: Under Bill s.1618 Title III passed by the 105th U.S.
Congress
this mail cannot be considered Spam as long as we include contact
information and a remove link for removal from our mailing list. If, at
any
time you would like to get out of this e-mail notification system,
please
follow the following procedure:- Reply with the word ""REMOVE"" in the
subject line. Include complete e-mail address and/or domain/aliases (if
any)
to be removed. If you still get the e-mails, please feel free to call us
at
the phone number given above. We apologize for the inconvenience caused.
P Please consider the environment before printing this e-mail
From: juliahann via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 12:01 PM
To: rajesh desai
Subject: RE: [compensation-strategy] What can we offer a candidate in
lieu
of a higher base salary?

Posted by juliahann (Sr. Manager,
Comp & Ben)
on Sep 18 at 11:48 AM
<http://hr.toolbox.com/api/ContentVote/3004729/1/2/> Mark this reply as
helpfulMark as helpful
The candidate is in his forties. Finance management.
From: allan_feinberg via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 1:09 AM
To: Julia Hann
Subject: RE: [compensation-strategy] What can we offer a candidate in
lieu
of a higher base salary?
[http://userimages.toolbox.com/user/b_1665309.jpg]
Posted by allan_feinberg (Director)
on Sep 18 at 3:58 AM
[http://images.ittoolbox.com/vt/icons/vote.png]Mark as
helpful<http://hr.toolbox.com/api/ContentVote/3003461/1/2/>
How old is he/she? And what profession?
From: juliahann via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, 18 September 2009 3:05 PM
To: Allan Feinberg
Subject: [compensation-strategy] What can we offer a candidate in lieu
of a
higher base salary?
Posted by juliahann (Sr. Manager,
Comp & Ben)
on Sep 18 at 3:06 AM
We have a consultant working for us that we would like to make an offer
to.
However, due to internal equity issues, we are not able to offer him the
base he is looking for. What are some creative things we could offer him
in
lieu of a higher base? Other than a sign on bonus, perhaps a retention
bonus, higher vacation accrual...is there anything else I""m not thinking
of?

Yes, that is the situation. The consultant knows we are not going to match the hourly rate he's billing us now.
From: UniversalConsultingServices via compensation-strategy [mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 9:33 AM
To: Julia Hann
Subject: RE: [compensation-strategy] What can we offer a candidate in lieu of a higher base salary?
[cid:image001.jpg@01CA386A.62A3C7F0]
Posted by UniversalConsultingServices (Director of Corporate HR)
on Sep 18 at 12:21 PM
[cid:~WRD000.jpg]Mark as helpful<http://hr.toolbox.com/api/ContentVote/3004811/1/2/>
Wasn't this situation where the employer wanted to hire the consultant
to become a regular employee of the company but the consultant's
requested base salary was more than current employees in the same job
category? Otherwise why would she be worried about a pay equity
situation? Perhaps I misunderstood her dilemma.
M
From: rren0429 via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 12:13 PM
To: Michaele Vestal
Subject: RE: [compensation-strategy] What can we offer a candidate in
lieu of a higher base salary?

Posted by rren0429 (vp)
on Sep 18 at 12:02 PM
Mark this reply as helpfulMark as helpful
<http://hr.toolbox.com/api/ContentVote/3004768/1/2/>
Generally,
Consultants - you do not pay benefits, 401K, management costs are lower,
payroll taxes, etc. also, it is a need base. You can lay them off
without
any compensation or wait periods which are offered to your employees.
Also,
consultants, pay their own commuting and residential expenses when they
go
to different jobs in different locations. All these aspects, when you
add
up, equates to more than 50% of pay. Hence, on-paper it may seem like
you
are paying more, in fact you are not. Also, you are contractors for a
time
when you need a particular skill for the job, once that is over, you do
not
need that.
I have seen a contractor's company offered 75/hour but was hired full
time
for 80K.What you offer is to his company and not to individual, then
company
takes profit (if he or she is a direct employee, if not then two or
three
parties take profit out of it). So, you have to look at this as a total
package. We have offered a candidate a retention bonus, say, 5K at the
end
of the first year and 10K at the end of second year, this also spreads
out
additional compensations to other budget years.
Thank you,
Rajesh Desai
Vice President
Systemart, LLC
Business Process Solutions for Higher Profitability
271 Route 46 West, Suite A 201, Fairfield, NJ 07004 (USA)
Phone: (973) 227 6582 x108
Cell: (973) 978 8170
Fax: (973) 808 0237
Website: <blocked::http://www.systemart.com> www.systemart.com
PLEASE NOTE: Under Bill s.1618 Title III passed by the 105th U.S.
Congress
this mail cannot be considered Spam as long as we include contact
information and a remove link for removal from our mailing list. If, at
any
time you would like to get out of this e-mail notification system,
please
follow the following procedure:- Reply with the word ""REMOVE"" in the
subject line. Include complete e-mail address and/or domain/aliases (if
any)
to be removed. If you still get the e-mails, please feel free to call us
at
the phone number given above. We apologize for the inconvenience caused.
P Please consider the environment before printing this e-mail
From: juliahann via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 12:01 PM
To: rajesh desai
Subject: RE: [compensation-strategy] What can we offer a candidate in
lieu
of a higher base salary?
Posted by juliahann (Sr. Manager,
Comp & Ben)
on Sep 18 at 11:48 AM
<http://hr.toolbox.com/api/ContentVote/3004729/1/2/> Mark this reply as
helpfulMark as helpful
The candidate is in his forties. Finance management.
From: allan_feinberg via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, September 18, 2009 1:09 AM
To: Julia Hann
Subject: RE: [compensation-strategy] What can we offer a candidate in
lieu
of a higher base salary?
[http://userimages.toolbox.com/user/b_1665309.jpg]
Posted by allan_feinberg (Director)
on Sep 18 at 3:58 AM
[http://images.ittoolbox.com/vt/icons/vote.png]Mark as
helpful<http://hr.toolbox.com/api/ContentVote/3003461/1/2/>
How old is he/she? And what profession?
From: juliahann via compensation-strategy
[mailto:compensation-strategy@hr.toolbox.com]
Sent: Friday, 18 September 2009 3:05 PM
To: Allan Feinberg
Subject: [compensation-strategy] What can we offer a candidate in lieu
of a
higher base salary?
Posted by juliahann (Sr. Manager,
Comp & Ben)
on Sep 18 at 3:06 AM
We have a consultant working for us that we would like to make an offer
to.
However, due to internal equity issues, we are not able to offer him the
base he is looking for. What are some creative things we could offer him
in
lieu of a higher base? Other than a sign on bonus, perhaps a retention
bonus, higher vacation accrual...is there anything else I""m not thinking
of?

I like to play around with the same money but call it different things to get people interested. For instance - if you were contemplating a sign-on bonus with an amount after a certain period of time going forward, you could offer to pay a mortgage for a year or a car payment for a year or a lease payment for a year. When people hear what the money equates to - their his a heightened interest. It is just a different angle. If you paid the mortgage for a year - you would be offering the money to him/her monthly and if they did not stay you could either set up a pay back or just end with the final payment.

Some thoughts:
- what else are you selling for the job? It is more secure? Better job? Great people? Is the consultancy market tough? What emotional and psychological strings do you have to pull? These all come into making a job decision
- retention bonus - consider staging it over 1 or 2 years, with milestones to be achieved around performance. This would be a win-win, and also reduce soe of the internal equity issues
- why is the employee considering joining?

If this person wants to move from contract rate to full time employed they will benefit from paid holiday and other benefits that s/he would normally have to fund for themselves. if you have compared total value of each contract and you are still short and wnat to redress this to attract talent (and recognise this individual as worth the effort what about some form of sponsored development i.e. part time degree or MBA. or other vocational development.
People often join companies for lifestyle reasons (flexible working arrangments i.e. work from home/flexible hours - so long as job is done.
Is there a career track - people will leave jobs where there is a ceiling reached and will take backsteps to get on a career track where they can go further - whilst you can't guarantee an outcome you can talk thru the career path and set the plan for this. The rest is up to the individual

Answered

Sorry! Something went wrong on our end. Please try again later.

Muthana

September 25, 2009 07:37 AM

Dear Sir/Madam and what you suggest for me and my case i.e what I have to do I am researcher on the renewable energy.
Thank you.
Best Regards.
Dr Muthana

Posted by S-P (Senior HR Operations Manager)
on Sep 25 at 4:46 AM Mark as helpful
If this person wants to move from contract rate to full time employed they will benefit from paid holiday and other benefits that s/he would normally have to fund for themselves. if you have compared total value of each contract and you are still short and wnat to redress this to attract talent (and recognise this individual as worth the effort what about some form of sponsored development i.e. part time degree or MBA. or other vocational development.
People often join companies for lifestyle reasons (flexible working arrangments i.e. work from home/flexible hours - so long as job is done.
Is there a career track - people will leave jobs where there is a ceiling reached and will take backsteps to get on a career track where they can go further - whilst you can't guarantee an outcome you can talk thru the career path and set the plan for this. The rest is up to the individual

Hi,
I agree with all of the above responses. Outline their Total Reward Package and the benefits of being a Permanent employee over a Contractor. If this is still not enough, have you considered having the discussion around what it is that he would like to see other than a higher base salary? Perhaps its sponsorship of Further Education, perhaps its a Company Car, perhaps its insurance cover for him and his family. What is it that makes the difference for HIM? Tailor the package accordingly, and potentially it could be in a way that reduces another component of his total reward package so your overall costs are not increased.
Regards,
Brendan